Aspect Software Inc., USA V. DCIT Circle 1(1)((1 )International Taxation), New Delhi

ITA 6661/DEL/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4949 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 09-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; Double taxation relief; Initiation of penalty proceedings
• Section: 271(1)(c); 92E; 234B; 260A; 144C; 115A; 72; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. KUL BHARAT, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 6661/DEL/2019 : ASSTT. YEAR : 2016-17 ASPECT SOFTWARE INC. C-56, NIZAMUDDIN (EAST), NEW DELHI-110013 VS DCIT, CIRCLE-1(1)(1), NEW DELHI-110002 (APPELLANT) (RESPONDENT) PAN NO. A A GCA7513D ASSESSEE BY : MS. RASHMI CHOPRA, ADV. REVENUE BY : SH. SUNIL KUMAR, CIT DR DATE OF HEAR ING: 20 . 0 9 .20 2 1 DATE OF PRONOUNCEMENT: 24 .0 9 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 24.06.2019 PASSED BY THE AO U/S 143 (3) R.W.S. 144C(13). 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. GENERAL 1.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LD. AO PURSUANT TO THE DIRECTIONS ISSUED BY HONBLE DRP IS BAD IN LAW IN A S MUCH AS FAILED TO APPRECIATE THE FACTS INVOLVED AND LAW THEREON. 1.2 THAT ON FACTS AND IN LAW, THE LD. AO/ DRP HAVE ERRED IN NOT FOLLOWING THE DECISION OF HONBLE DELH I ITA NO.6661/DEL/2019 ASPECT SOFTWARE INC. 2 HIGH COURT (HC) AND HONBLE ITAT IN THE CASE OF APPELLANTS OWN CASE FOR EARLIER YEARS. 1.3 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHILE PASSING THE ASSESSMENT ORDER, THE LD. AO HAS ERRED IN COMPUTING THE TOTAL INCOME OF THE APPELLANT AT RS. 12,48,05,161 AS AGAINST RS. 65,51,514 INCOME RETURNED BY THE APPELLANT AND THEREFORE, THE ORDER OF THE LD. AO IS BAD IN LAW AN D NEEDS TO BE ANNULLED. 2. REVENUE EARNED FROM SUPPLY OF SOFTWARE TAXED AS ROYALTY IS INCORRECT 2.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/DRP HAVE GROSSLY ERRED IN TAXING TH E REVENUE EARNED BY THE APPELLANT AMOUNTING TO RS. 11,82,53,647 FROM SUPPLY OF SOFTWARE TO CUSTOMERS I N INDIA AS ROYALTY UNDER ARTICLE 12 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND UNITED STATES OF AMERICA (INDIA - US TAX TREATY). 2.2 THAT ON FACTS AND IN LAW, THE LD. AO/ DRP HAVE ERRED IN NOT FOLLOWING THE DECISION OF HONBLE HC A ND HONBLE ITAT IN APPELLANTS OWN CASE FOR EARLIER YE ARS WHERE THE HONBLE HC AND HONBLE ITAT HAS HELD THAT THE CONSIDERATION RECEIVED BY THE APPELLANT FOR SUP PLY OF SOFTWARE IS FOR COPYRIGHTED ARTICLE AND IS NOT I N THE NATURE OF ROYALTY UNDER ARTICLE 12 OF THE INDIA-US TAX TREATY. 2.3 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HONBLE DRP HAS GROSSLY ERRED IN CONFIRMING TH E OBSERVATION OF THE LD AO THAT SOFTWARE MADE AVAILABLE A PROCESS TO CUSTOMERS WHO USED THE PROCESS WHILE CARRYING OUT THEIR BUSINESS. 2.4 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD AO / DRP HAVE ERRED IN RELYING ON NOMENCLATURE LICENSE WRITTEN IN THE AGREEMENTS RATHER THAN THE SUBSTANCE OF THE TRANSACTION WHICH WAS SALE OF GOOD, I.E. SALE OF SOFTWARE. ITA NO.6661/DEL/2019 ASPECT SOFTWARE INC. 3 2.5 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD AO HAS ERRED IN PLACING RELIANCE ON DECISION OF GRACEMAC CORPORATION [134 TTJ 257 (DELHI)], WHICH IS NOT A GOOD LAW IN VIEW OF VARIOU S LEGAL AND FACTUAL INACCURACIES IN THE OBSERVATIONS RECORDED AND WHICH HAS BEEN DISTINGUISHED BY VARIOU S COURTS SUBSEQUENTLY. 2.6 THAT ON FACTS AND IN LAW, THE HONBLE DRP AND L D. AO HAVE ERRED IN NOT APPRECIATING THAT: 2.6.1 THE DEFINITION OF ROYALTY IS DIFFERENT IN THE ACT AND THE INDIA-US TAX TREATY; 2.6.2 THE BENEFITS AVAILABLE UNDER THE INDIA-US TAX TREATY WOULD STILL BE AVAILABLE TO THE APPELLANT AS THE AMENDMENTS IN THE FINANCE ACT 2012 WOULD NOT IMPACT THE TREATY INTERPRETATION OF THE TERM ROYALT Y. 2.6.3 THAT ON FACTS AND IN LAW, THE HONBLE DRP AND LD. AO HAVE FAILED TO APPRECIATE THAT THE SALE OF SOFTWARE IS A SALE OF COPYRIGHTED ARTICLE AND NOT COPYRIGHT AND ACCORDINGLY, THE REVENUE FROM SALE OF SOFTWARE IS IN THE NATURE OF BUSINESS INCOME NOT TAXABLE UNDER ARTICLE 7 OF INDIA-US TAX TREATY IN T HE ABSENCE OF THE PE OF THE APPELLANT IN INDIA. 2.7 THAT ON FACTS AND IN LAW, THE LD. AO/ DRP HAVE ERRED IN NOT RELYING AND DISTINGUISHING THE DECISIO NS RELIED UPON BY THE APPELLANT INCLUDING THE HONBLE APEX COURT AND THE JURISDICTIONAL HIGH COURT IN THE CASES OF TATA CONSULTANCY SERVICES (2004) (271 ITR 401) (SC), ZTE CORPORATION (2017) (237 DLT 572) (DE L HC), INFRASOFT LTD. (264 CTR 239), ERICSSON A.B. AN D METAPATH (343 ITR 370) (DEL HC), NOKIA NETWORKS OY (253 CTR 0417) (DEL HC), ALCATEL LUCENT CANADA (2015) (372 ITR 0476) (DEL HC) ON THE ONE SIDE AND RATHER RELYING ON THE DECISIONS OF OTHER COURTS AND AAR IN THE CASES OF SAMSUNG ELECTRONICS [(203 TAXMA N 477) (KAR HC) / (TS-696-HC-2011)], MILLENIUM IT SOFTWARE [(338 ITR 391) (AAR) / (TS-585-AAR-2011)], ING VYSYA BANK LTD. DDIT (61 DTR 401, ITAT BANGALORE), CITRIX SYSTEMS (343 ITR 1)/ (AAR NO. 82 2 OF 2009)) ON THE OTHER SIDE. ITA NO.6661/DEL/2019 ASPECT SOFTWARE INC. 4 3. REVENUE EARNED FROM SUPPLY OF SOFTWARE TAXED @ 15% AS PER INDIA-US TAX TREATY IN THE FINAL ASSESSMENT ORDER, INSTEAD OF APPLYING BENEFICIAL RA TE OF 10% AS PER THE PROVISIONS OF SECTION 115A OF THE ACT. WITHOUT PREJUDICE TO THE GROUND NO. 2, ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ D RP HAVE GROSSLY ERRED IN TAXING THE REVENUE FROM SUPPL Y OF SOFTWARE AS ROYALTY @ 15% AS PER INDIA - US TA X TREATY IN THE FINAL ASSESSMENT ORDER, INSTEAD OF APPLYING BENEFICIAL RATE OF 10% AS PER THE PROVISIO NS OF SECTION 115A OF THE ACT. 4. REVENUE EARNED FROM RENDERING OF PROFESSIONAL, EDUCATIONAL AND TRAINING SERVICES TAXED @ 15% AS PE R INDIA-US TAX TREATY IN THE FINAL ASSESSMENT ORDER, INSTEAD OF APPLYING BENEFICIAL RATE OF 10% CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME AS PER THE PROVISIONS OF SECTION 115A OF THE ACT. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS GROSSLY ERRED IN TAXING THE REVENUE FROM RENDERING OF PROFESSIONAL, EDUCATIONAL AND TRAINING SERVICES @ 15% AS PER THE PROVISIONS O F INDIA - US TAX TREATY IN THE FINAL ASSESSMENT ORDER , INSTEAD OF APPLYING BENEFICIAL RATE OF 10% CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME AS PER THE PROVISIONS OF SECTION 115A OF THE ACT. 5. DRP DIRECTIONS ARE LACONIC WITH RESPECT TO HOW TP PROVISIONS APPLY TO APPELLANT 5.1 WITHOUT PREJUDICE TO OUR OTHER GROUNDS OF APPEA L, THE ORDER ISSUED BY THE HONBLE DRP IS LACONIC AS T HE DRP HAS FAILED TO ISSUE DIRECTIONS TO THE LD. AO ASCRIBING COGENT AND GERMANE REASONS FOR THEIR AGREEMENT WITH THE FINDINGS OF THE LD. AO IN THE DR AFT ORDER OF ASSESSMENT UNDER SECTION 144C OF THE ACT. 5.2 THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. AO/DRP HAVE ERRED IN HOLDING TH AT THE TRANSFER PRICING PROVISIONS ARE APPLICABLE TO T HE APPELLANT. THE APPELLANTS TRANSACTION OF SALE OF I TS ITA NO.6661/DEL/2019 ASPECT SOFTWARE INC. 5 PRODUCTS IN INDIA DIRECTLY TO THIRD PARTIES OR THRO UGH CHANNEL PARTNERS DOES NOT QUALIFY AS AN INTERNATIO NAL TRANSACTION (DEFINED UNDER THE ACT) AS IT DOES NOT ENTAIL A TRANSACTION BETWEEN TWO ASSOCIATED ENTERPRISES. 5.3 THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. AO/DRP HAVE ERRED BY NOT APPRECIATING THAT TRANSFER PRICING PROVISIONS ARE N OT APPLICABLE IN THE INSTANT CASE AND THEREFORE, ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271BA OF THE ACT FOR NOT FURNISHING THE ACCOUNTANTS REPORT IN FORM 3CEB AS PRESCRIBED UNDER SECTION 92E OF THE AC T. 6. LEVY OF INTEREST UNDER SECTION 234C OF THE ACT THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS GROSSLY ERRED IN CHARGING INTER EST UNDER SECTION 234C OF THE ACT. 7. INITIATION OF PENALTY PROCEEDINGS THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT HOLD ING THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICU LARS OF INCOME. 3. ASPECT SOFTWARE INC. IS A CORPORATION INCORPORAT ED IN DELAWARE STATE, USA. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVISION OF HARDWARE, SOFTWARE AND RENDERING OF SUPPORT SERVICES THAT ENABLE CALL CENTRE COMPANIES, TO BETT ER MANAGE CUSTOMER INTERACTIONS VIA VOICE, EMAIL, WEB AND FAX . THE ASSESSEE DERIVES ITS REVENUE PRIMARILY FROM SUPPLY OF 'CONTACT SOLUTIONS', SOFTWARE LICENSE AND PROVISION OF SERVI CES INCLUDING, INSTALLATION, MAINTENANCE AND PROFESSIONAL SERVICES . THE ASSESSEE HAS ALSO PROVIDED INSTALLATION/ IMPLEMENTA TION AND MAINTENANCE OF THE SUPPLIED HARDWARE AND SOFTWARE. ITA NO.6661/DEL/2019 ASPECT SOFTWARE INC. 6 4. ASPECT US HAD TWO SUBSIDIARIES IN INDIA - ASPECT CONTACT CENTER SOFTWARE INDIA PVT. LTD. (ACC) AND (II) ASPE CT TECHNOLOGY CENTER (INDIA) PVT. LTD. (ATC). ACC IS I NVOLVED IN THE BUSINESS OF INSTALLATION OF EQUIPMENT AND PROVI DING, MARKETING SUPPORT TO THE ASSESSEE. ATC IS THE R&D E NTITY, WHICH INVOLVES AS WELL AS PROVIDES, TESTING, PROVIDING MA INTENANCE SUPPORT TO THE ASSESSEE. 5. DURING THE YEAR, THE ASSESSEE RECEIVED REVENUES IN INDIA DURING THE F.Y. 2015-16 FROM THE FOLLOWING CATEGORI ES WHICH IS AS UNDER: A. SUPPLY OF HARDWARE (OFFSHORE SUPPLY) RS.474 ,18,129/- B. SUPPLY OF SOFTWARE (OFFSHORE SUPPLY) RS.118 2,53,647/- C. MAINTENANCE AND IMPLEMENTATION SERVICES RS.1834,5 9,663/- D. PROFESSIONAL SERVICES (OFFERED TO TAX) RS .65,51,510/- 6. THE AO HELD THAT THE ASSESSEE HAD AN AGENCY PE I N INDIA IN THE FORM OF ASPECT CONTACT CENTRE SOFTWARE INDIA PVT. LTD. FOR THE SUPPLY OF HARDWARE IN INDIA AND PROPOSED 15 % ATTRIBUTION OF INCOME TO INDIAN PE AND ALSO ALLOCAT ED PROPORTIONATE EXPENDITURE OF 13.1% OUT OF THE AMOUN T REIMBURSED TO ASPECT INDIA (PE) BY THE ASSESSEE. TH E AO HAS ALSO HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF SOFTWARE LICENSING AS LOYALTY U/S 9(1)(VI) & (VI I) OF THE INCOME TAX ACT, 1961 AND UNDER THE ARTICLE 12 OF TH E TREATY BETWEEN INDIA AND USA. 7. THE LD. DRP HAS DISAGREED WITH THE FINDINGS OF T HE AO IN THE DRAFT ORDER AND DIRECTED THAT ATTRIBUTION OF PR OFITS OF 15% FROM THE SALE OF EQUIPMENT AND ALSO THE EXPENDITURE BE SCORED ITA NO.6661/DEL/2019 ASPECT SOFTWARE INC. 7 THROUGH WHILE PASSING THE FINAL ASSESSMENT ORDER, T HUS, LEAVING THE ISSUE OF TAXATION OF THE SUPPLY OF SOFTWARE UND ER ROYALTY. THE AO TAXED THE SUPPLY OF SOFTWARE @ 15% WHEREAS T HE ASSESSEE CONTENDED THAT THE ROYALTY SHOULD BE TAXED AT THE BENEFICIAL RATE OF 10% AS PER THE PROVISIONS OF SEC TION 115A(1)[(BA)(B)]. 8. DURING THE ARGUMENTS BEFORE US, THE LD. AR BROUG HT TO OUR NOTICE, THE ORDER OF THE HONBLE DELHI HIGH COURT I N THE ASSESSEES OWN CASE FOR THE EARLIER YEAR DATED 25.0 4.2017 WHICH READS AS UNDER: CIT (INTERNATIONAL TAXATION) 1 VS. ASPECT SOFTWAR E INC. ITA NOS. 909/2015, 28/2016, 861/2016, 944/2016, 4/2 017, 6/2017 PAGE 4 OF 7 ITA NOS. 909/2015, 28/2016, 861/ 2016, 944/2016, 4/2017, 6/2017 3. THESE ARE APPEALS UNDER SECTION 260A OF THE INCO ME TAX ACT, 1961 (ACT) BY THE REVENUE AGAINST THE IMPUGN ED ORDER DATED 18TH MAY 2015 PASSED BY THE INCOME TAX APPELL ATE TRIBUNAL (ITAT) IN ITA NOS. 04/DEL/2012, 1124/DEL /2014, 1125/DEL/2014, 221/DEL/2013, 720/DEL/2013, AND 82/DEL/2011 FOR THE ASSESSMENT YEARS (AYS) 2008-0 9, 2004-05, 2010- 11, 2003-04, 2009-10 AND 2007-08 RESPECTIVELY. 4. WHILE ADMITTING THESE APPEALS ON 16TH JANUARY, 2 017, THIS COURT PASSED THE FOLLOWING ORDER: ITA NO.6661/DEL/2019 ASPECT SOFTWARE INC. 8 ADMIT. THE FOLLOWING QUESTIONS OF LAW ARISE FOR CONSIDERAT ION: (I) DID THE ITAT FALL INTO ERROR IN HOLDING THAT TH E TRANSACTION IN QUESTION, I.E., SUPPLY OF CUSTOMIZED SOFTWARE WA S NOT ROYALTY UNDER ARTICLE 12 (4) OF THE INDO-US DOUBL E TAXATION AVOIDANCE AGREEMENT (DTAA) READ WITH SECTION 9 (1) (VII) OF THE INCOME TAX ACT, 1961, IN THE CIRCUMSTANCES OF T HE CASE. (II) DID THE ITAT FALL INTO ERROR IN ITS INTERPRETA TION OF SECTION 234 (B) OF THE INCOME TAX ACT, 1961, IN THE CIRCUMS TANCES OF THE CASE. 5. APART FROM THE ORDER AS NOTED ABOVE, THE COURT D ECIDED THAT THESE PRESENT APPEALS WOULD BE CONSIDERED IN L IGHT OF THE JUDGMENT TO BE RENDERED BY THE COURT IN A BATCH OF APPEALS (THE COMMISSIONER OF INCOME TAX INTERNATION AL TRANSACTION -2 V. ZTE CORPORATION ITA 904-909/201 6). 6. THAT BATCH OF APPEALS HAS BEEN DECIDED BY THE CO URT BY ITS DECISION IN THE COMMISSIONER OF INCOME TAX INTERNAT IONAL TRANSACTION -2 V. ZTE CORPORATION 237 (2017) DLT 5 72 (DB). THE QUESTIONS THAT AROSE IN THE AFOREMENTIONED BATC H OF APPEALS ALSO INVOLVED THE QUESTIONS THAT ARISE IN T HE PRESENT BATCH OF APPEALS. THE QUESTIONS WERE ANSWERED IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 7. THE FIRST ISSUE IS WHETHER THE PAYMENT FOR SUPPL Y OF CUSTOMIZED SOFTWARE WOULD BE TREATED AS ROYALTY U NDER ARTICLE 12(3) OF THE INDO-US DOUBLE TAXATION AVOIDA NCE AGREEMENT (DTAA) READ WITH SECTION 9(1)(VI) OF ACT. IN ZTE CORPORATION (SUPRA), THE ASSESSEE BEING A RESIDENT OF REPUBLIC OF CHINA THE TRANSACTIONS WERE GOVERNED BY THE INDO-CHINA DTAA CONTAINING IDENTICAL CLAUSES AS THE INDO-US ITA NO.6661/DEL/2019 ASPECT SOFTWARE INC. 9 DTAA. RELYING ON THE DECISION OF THIS COURT IN DIRE CTOR OF INCOME TAX V. ERICSSON AB (2012) 343 ITR 470, THIS COURT IN ZTE CORPORATION (SUPRA) HELD IN PARA 22 AS UNDER: 22. IN THE PRESENT CASE, THE FACTS ARE CLOSELY SIM ILAR TO ERICSON. THE SUPPLIES MADE (OF THE SOFTWARE) ENABLE D THE USE OF THE HARDWARE SOLD. IT WAS NOT DISPUTED THAT WITHOUT THE SOFTWARE, HARDWARE USE WAS NOT POSSIBLE. THE ME RE FACT THAT SEPARATE INVOICING WAS DONE FOR PURCHASE AND O THER TRANSACTIONS DID NOT IMPLY THAT IT WAS ROYALTY PAYM ENT. IN SUCH CASES, THE NOMENCLATURE (OF LICENSE OR SOME OT HER FEE) IS INDETERMINATE OF THE TRUE NATURE. NOR IS TH E CIRCUMSTANCE THAT UPDATES OF THE SOFTWARE ARE ROUTI NELY GIVEN TO THE ASSESSEES CUSTOMERS. THESE FACTS DO N OT DETRACT FROM THE NATURE OF THE TRANSACTION, WHICH W AS SUPPLY OF SOFTWARE, IN THE NATURE OF ARTICLES OR GO ODS. THIS COURT IS ALSO NOT PERSUADED WITH THE SUBMISSION THA T THE PAYMENTS, IF NOT ROYALTY, AMOUNTED TO PAYMENTS FOR THE USE OF MACHINERY OR EQUIPMENT. SUCH A SUBMISSION WAS NE VER ADVANCED BEFORE ANY OF THE LOWER TAX AUTHORITIES; MOREOVER, EVEN IN ERICSON (SUPRA), A SIMILAR PROVIS ION EXISTED IN THE DTAA BETWEEN INDIA AND SWEDEN. 8. THE ITAT HAS, IN ITS IMPUGNED ORDER DATED 18TH M AY 2015, ALSO RELIED UPON THE DECISION IN ERICSON (SUPRA) AN D DIRECTOR OF INCOME TAX V. INFRASOFT LIMITED (2014) 220 TAXMA N 273 (DEL) AND HELD AS UNDER: 41. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSE E AS WELL AS THE LEARNED D.R. RELIED ON SEVERAL DECISION S OF THE HIGH COURT AND TRIBUNAL RENDERED ON THE SUBJECT. TH ESE DECISIONS ARE NOT BEING CONSIDERED AS THE ISSUE IS EXTENSIVELY DEALT BY THE HON'BLE JURISDICTIONAL HIG H COURT IN THE CASES OF M/S ERICSSON A.B. AND INFRASOFT LTD. ( SUPRA) ITA NO.6661/DEL/2019 ASPECT SOFTWARE INC. 10 WHICH ARE BINDING ON THIS TRIBUNAL. WE OBSERVE THAT ALL THE ARGUMENTS PUT FORTH BY THE REVENUE' AND THE ASSESSE E ARE CONSIDERED AND ANSWERED IN THESE DECISIONS. FURTHER , THE DELHI HIGH COURT IN INFRASOFT HAS EXPRESSED IT~ DISAGREEMENT WITH THE VIEW TAKEN' BY THE KARNATAKA HIGH COURT IN THE CASE OF SAMSUNG ELECTRONICS CO LTD. HE NCE, THE DECISIONS RELIED BY THE LEARNED CITDR IN THE CA SE OF SAMSUNG ELECTRONICS AND GRACEMAC CORPORATION (SUPRA ) DOES NOT HELP THE CASE OF THE REVENUE, AS WE ARE UN DER THE JURISDICTION OF THE HON'BLE DELHI HIGH COURT. 42. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING TH E DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ERICSSON A.B. (SUPRA) AND INFRASOFT LTD. (SUPRA), WE HOLD TH AT THE CONSIDERATION RECEIVED BY THE ASSESSEE FOR SUPPLY O F PRODUCT ALONG WITH LICENSE OF SOFTWARE TO END USER IS NOT ROYALTY UNDER ARTICLE 12 OF THE TAX TREATY. EVEN WH ERE THE SOFTWARE IS SEPARATELY LICENSED WITHOUT SUPPLY OF H ARDWARE TO THE END USERS (I.E. EIGHT OUT OF 63 CUSTOMERS), WE ARE OF THE VIEW THAT THE TERMS OF LICENSE AGREEMENT IS SIM ILAR TO THE FACTS OF INFRASOFT LTD' (SUPRA). ACCORDINGLY, W E- HOLD' THAT THERE WAS NO TRANSFER OF ANY RIGHT IN RESPECT OF COPYRIGHT BY THE ASSESSEE AND IT WAS A CASE OF MERE TRANSFER OF A COPYRIGHTED ARTICLE. THE PAYMENT IS F OR A COPYRIGHTED ARTICLE AND REPRESENTS THE PURCHASE PRI CE OF AN ARTICLE. HENCE, THE PAYMENT FOR THE SAME IS NOT IN THE NATURE OF ROYALTY UNDER ARTICLE 12 OF THE TAX TREAT Y. THE RECEIPTS WOULD CONSTITUTE BUSINESS RECEIPTS IN THE HANDS OF THE ASSESSEE AND IS TO BE ASSESSED AS BUSINESS INCO ME SUBJECT TO ASSESSEE HAVING BUSINESS CONNECTION/PE I N INDIA AS PER ADJUDICATION ON GROUND NO.5. ITA NO.6661/DEL/2019 ASPECT SOFTWARE INC. 11 9. WITH THE ITAT HAVING FOLLOWED THE DECISIONS OF T HIS COURT AND THIS COURT HAVING REITERATED THE LEGAL POSITION IN COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION -2 V. ZTE CORPORATION (SUPRA), THE COURT ANSWERS QUESTION (I) IN THE NEGATIVE AND HOLDS THAT THE IMPUGNED ORDER OF T HE ITAT SUFFERS FROM NO LEGAL INFIRMITY. QUESTION (I) IS, T HEREFORE, ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 10. TURNING TO QUESTION (II) REGARDING THE INTERPRE TATION OF SECTION 234B OF THE ACT, THE COURT FINDS THAT IN CO MMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION -2 V. ZTE COR PORATION (SUPRA), THE QUESTION HAS BEEN ANSWERED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE FOLLOWING THE DECI SION IN DIRECTOR OF INCOME TAX V. GE PACKAGED POWER INC. 37 3 ITR 65. CONSEQUENTLY, THIS ISSUE IS ALSO ANSWERED AGAIN ST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 11. THESE APPEALS ARE ACCORDINGLY DISMISSED BUT IN THE CIRCUMSTANCES OF THE CASE, NO ORDERS AS TO COSTS. 9. SINCE, THE ISSUE OF TAXABILITY OF SUPPLY OF SOFT WARE AS ROYALTY HAS BEEN RULED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE HONBLE HIGH COURT, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/09/2021. SD/- SD/- (KUL BHARAT) ( DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 24/09/2021 *SUBODH KUMAR, SR. PS* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR